Is Employer Nepotism Illegal?

I get this question a lot. Can an employer favor a relative over you? Is nepotism illegal?

The simple answer is, no. Nepotism is not illegal. Your employer can
fire you to hire their son, daughter, nephew or second cousin twice
removed.

That being said, there are some circumstances where nepotism might be illegal:

Public Employer: While I don't know of any state
that has a law prohibiting nepotism in the private workplace, many laws
exist prohibiting nepotism at government entities.

Foreign Corrupt Practices Act: If your company does business overseas and hires relatives of an overseas public official, they may be violating the Foreign Corrupt Practices Act.

Failure to Disclose: While nepotism isn't illegal
under federal securities laws, it is illegal not to disclose any
potential conflict of interest to shareholders. Failure to disclose
might violate Sarbanes-Oxley.

Race Or National Origin Discrimination: If the
company hires mostly relatives, they may be crossing the line into race
or national origin discrimination. If they are turning down better
qualified people of a different race or ethnicity, then hiring
relatives, they might get crosswise with Title VII or state
discrimination laws.

Marital Status Discrimination: If there's a
no-married-couples policy, some companies make the mistake of making the
woman leave when employees marry. Or maybe they just say the person of
lowest rank has to go. A policy like that might discriminate against
women.

Of course, many companies have policies prohibiting nepotism, or at
least prohibiting relatives from hiring, promoting, supervising or
firing relatives. If your boss violated that policy, then you might
think about reporting them to HR. Some companies even have anonymous
reporting lines that let you report violations of policy without giving
your name. If you do report a violation that isn't illegal, you probably
aren't legally protected against retaliation, so be very careful.